Margin Calls and Currency Trading

Here’s some common mistakes forex traders make to get margin calls.

1. Not paying attention to the news
Die hard technical trading followers can get their account balance lowered to dangerous level if not wiped out totally during big fundamental changes that happen in the political and economic news. It is a must that you understand what is happening, also keep an eye on the economic calendar even if your trading is not based on it.

2. Trading too much
Many new traders trade too much: placing more trades than they can afford, not understanding when too much is too much. First master trading only one position at the time, then after you are more experienced add more positions.

3. Not trading systematically
To be a successful currency trader you need a systematic approach, you can back test your trading system first before committing any real money in to the market. Once you have a winning plan start small, and do not let your emotions get the best of you. A systematic trading approach gives you the tools to make you money. Without a great system, you will surely start loosing money.

4. Not using stops
Always you stops, not just mentally but also put them in the market, you do not know what’s going happen to your broker or your Internet connection. It takes many loosing trades before you can understand just where to place stop orders, hopefully you do now have to learn the hard way.

5, Poor or no money management
There are many great books written on this subject, money management is as important as your trading system. You will have to know when to take profits and when to cut your losses or your trading account could be wiped out too soon.

6. Trading against the trend
Unless you have millions of Dollars you can not afford to trade against the trend, sure the market is going to stop and reverse at some point in time but it is too risky to bet on it. Your trading system should identify the underlying market trend and trade in the direction of the prevailing market trend.

7. Not getting out of losing trade
Learning to get out of losing trade is one of the hardest things to master. Wishful thinking and dreaming will not help you in this matter. Big losing trades make it hard if not impossible to regain the money that was lost. Take your losses early and place some better trades next time.

Good luck with your FX!